The concept of potential gains can be used to rank production facilities, since it is unlikely to be the case that all facilities capable of producing an output at a specific quantity will do so with the same results for value and cost.

A particular manufacturing plant may have superior production methods and stricter quality controls than others in its industry, resulting in above-average potential value. A specific farm might be extremely careless with pesticides and herbicides, resulting in above-average natural cost.
Because of differences such as these, ENL needs a method for determining which production facilities should be preferred to others. The production of final outputs is considered first. See the two graphs in the follwoing figure.

Ranking two production facilities

Facilities are ranked according to the potential gains they achieve in producing the assigned quantity of an output.

Facility A and B produce the same output, and both are able to produce quantity Q in a specified period of time. At facility A, however, potential value is higher and input cost is lower than at facility B. This is evident from the larger potential gains area for facility A.

If these are the only two facilities producing this output, production should initially take place at facility A. Only “initially”, because potential gains decrease at the margin, as is evident by the shrinking distance between potential value and input cost in both cases. Once these marginal gains are lower for facility B than for facility A, incremental production should shift to facility B.

If facility A is located at a greater distance from consumers than facility B, more of its output may be spoiled or destroyed en route, and more natural cost may be incurred through pollution from trains and trucks. The additional output loss would decrease the potential value of A's outputs, and the additional natural cost would increase A's input cost.

Facilities that produce intermediate outputs must also be ranked. Examples include the production of coal, trucks, and fuel for ships. Because potential value is absent in such cases, potential gains cannot be used, and the ranking must be based entirely on input cost.

For example, an iron mine that produces a specific quantity of iron with the lowest number of worker injuries and deaths, and with the least habitat destruction and other environmental damage, will have the lowest input cost. This mine will thus contribute least to the life-cycle input cost of the associated final outputs.

On the assumption that this mine uses the same input quantities as other mines, it would initially be the preferred iron producer in an ENL-driven economy.

1. We have to be careful not to fixate on transportation in deciding which production facility to use: “…while it might seem logical that the further an item of food journeys, the more carbon emissions it generates, this turns out not to be the case. When you count the energy used by harvesting and milking equipment, farm vehicles, feedstock and chemical fertilizer manufacture, hothouses and processing factories, transportation emerges as just one piece of the carbon dioxide jigsaw puzzle… Sometimes this might mean choosing products with far-off origins because the methods used to raise or process them are more environmentally sustainable than the local equivalent.” (“The Deep-Fried Truth” by Sarah Murray, New York Times, December 14, 2007.)
Most studies that draw such conclusions are suspect because they come from organizations — such as the Times — that are deeply committed to capitalist globalization. Nevertheless, an underlying truth probably remains.